Market Overview

According to some “experts,“ the recession is over. The economy is growing again with the Gross Domestic Product back to mid-2008 levels. The stock market has experienced a rebound. Businesses have begun to spend, and consumer spending appears to be increasing. Yet, a pessimistic attitude remains as unemployment stays high, the housing market still struggles, commercial real estate markets continue to weaken, and credit remains tight.

In the St. Louis region, unemployment and the commercial real estate markets are the main concerns. The February 2010 unemployment rate was 10.3% (seasonally adjusted), up from 9.7% in January. In the year ending February 2010, the region lost 5,000 jobs. While disturbing, the number of jobs lost is less than in some other regions. Manufacturing, Trade, Transportation & Utilities, Mining, Logging & Construction sectors experienced the greatest
job losses.

Housing sales declined 1.4% for January and February 2010 from the same period in 2009. The local median housing price, however, rose 11.5% between first quarters 2009 and 2010 to $126,800. For the same period, the U.S. median housing price decreased 4.1% to $172,900. Permits for new single family housing rose 54% for January and February 2010 from the same period of 2009. The total number of permits remained small at 434 for
the Missouri side of the river. Home foreclosures appear to have stabilized, but the number of households behind
in mortgage payments was 6.1% in February, higher than previous months, but lower than the nearly 8.8% for the nation.

Multifamily permits increased to nearly 400 permits for January and February 2010. Eighty one percent of the permits were rehab units in the City of St. Louis. The vacancy rate for rental apartments remained high because of the economy and competition from available condominium units. Rental increases are minor. Condominium sales in completed projects have improved as proposed developments are stopped. (In 2009, sales, however, were 50% less than in 2008 in the city of St. Louis and about 85% less in 2009 than in 2008 in St. Louis County). Sales of apartment complexes have continued only where the developments had assumable long-term financing or provide large down payments. The 300-unit Schoettler Village in Chesterfield was recently purchased by Maxus Properties
of Kansas City.

All of the commercial real estate markets are under stress. Loans need refinancing, and financing remains tight. Tenants are negotiating lower lease rates and shorter terms, reducing income. New construction is virtually stopped except for a limited number of retail facilities, mostly national chain restaurants and drug stores. In 2009, investment in commercial properties totaled $240 million, the lowest amount in a decade. More sales are anticipated in 2010, however, of default and foreclosed properties.

In the retail marketplace, lower asking rents have existing tenants asking for rent reductions. The average rate for retail space has declined to about $12 per sq. ft. with many concessions and shorter lease periods. The St. Louis regional vacancy rate continues to range from 10% to over 11%, depending upon the source, with 12% or more vacant in North St. Louis County and St. Charles County. Some traditional office users such as medical, education, and government have moved into retail space. Retail space is heavily discounted, often has no common area expenses, and provides more parking.

Macy’s plans to “right size” its downtown store to three floors, about the same square footage as its newly built stores. Macy’s has closed its store at Northwest Plaza, leaving only Sears as anchor. The City of St. Ann has selected G. J. Grewe, a local developer, to redo the center. A Nordstrom’s Rack will open in Brentwood Square Shopping Center in September. Nordstrom’s second store in the region is now expected to open in the Galleria in September 2011.

The overall industrial vacancy rate is 16%. The vacancy rate jumped last year because of the addition of over 6 million sq. ft. at the shuttered Chrysler plants and suppliers. The federal government has pledged $1.75 million toward the cleaning, positioning, and marketing of the 5.1 million sq. ft. shuttered Chrysler plants. St. Louis County and the City of Fenton will add another $575,000 to the reuse process.

Industrial sales prices and lease rates have fallen, and new construction has almost stopped. Brokers, however,
are reporting that more companies are looking for industrial space. Also on the positive side, Express Scripts is buildings a $60 million, 235,000 sq. ft. fulfillment facility in NorthPark, near the airport and its headquarters.

While the St. Louis office market is healthier than many other regions of the country, it has not yet begun to stabilize. Vacancies are up, rental rates down. Large blocks of office space are now available in both the downtown and the suburban markets. Financing remains tight. No major building is underway except the 485,250 sq. ft. building at Centene Plaza. The Centene building will open in 2010 with 200,000 sq. ft. utilized by Centene Corp.; 125,000 sq. ft. by Armstrong Teasdale, a law firm moving from Downtown St. Louis; and 46,500 sq. ft. leased to Stinson Morrison Hecker, a Clayton law firm.

Tenants are taking advantage of deals in the marketplace or renegotiating existing leases with different rate and terms. Leases, especially renewals, can be short-term, one to five years. Tenants are occasionally using lower lease rates to move to better quality buildings. Rent abatement, tenant improvement allowances, and higher brokerage commissions are common in the marketplace as owners try to retain tenants.

During first quarter 2010, total available office space rose to 13.1 million sq. ft. or 16.9% of inventory, up from 12.8 million sq. ft. at year-end 2009, and 11.1 million sq. ft. or 14.6% of inventory at third quarter 2009. Overall absorption was a negative (259,500) sq. ft. All submarkets experienced negative overall absorption except Midtown, Creve Coeur/Westport, and St. Charles County, and even these amounts were small. No new deliveries were added to inventory during the first quarter of 2010. Average asking rent for all properties was $18.23 per sq. ft., continuing a decline that began at second quarter 2008. Besides shorter lease term renewals and lower rents, the average amount of space leased has also decreased. On the positive side, a number of companies are currently looking for 50,000 sq. ft. or more of space to lease.

Class A availability rose to 16.8% or 5.96 million sq. ft. during first quarter 2010. Absorption for Class A properties is a negative (192,500) sq. ft. The CBD Class A availability rate increased to 18.9% or 2.0 million sq. ft. at first quarter 2010 from 18.6% or 1.9 million sq. ft. at year-end 2009. Availability in the suburban markets increased to 15.9% at first quarter 2010 from 14.9% at year-end 2009. Available Class A suburban space is now 4.0 million sq. ft. Average Class A asking rents declined to $21.59 per sq. ft. at first quarter 2010 from $21.68 per sq. ft. during year-end of 2009, down from over $22.00 per sq. ft. at first quarter 2009 and most of 2008.

Class A sublease space rose during first quarter 2010, increasing to 936,900 sq. ft., or 15.8% of all available Class A space. The largest amounts of available Class A sublease space are in South County (326,500 sq. ft.), West County (153,200 sq. ft.), and the CBD (115,800 sq. ft.) submarkets. Available sublease space could actually be higher as some companies appear to be retaining underutilized space while awaiting economic recovery.

The availability rate for Class B office space remained stable during first quarter 2010 at 17.8%. Total available Class B space is 4.9 million sq. ft. Absorption for first quarter 2010 was a positive 21,800 sq. ft. Class B asking average rent declined to $17.51 per sq. ft. at first quarter 2010 from $17.75 per sq. ft. at year-end 2009. Average asking rent had been $18.00 per sq. ft. or better from third quarter 2007 to year-end 2008.

The availability rate for Class C space increased to 15.7% or 2.3 million sq. ft. at first quarter 2010 from 14.4% at year-end 2009. Absorption during first quarter 2010 was a negative (88,800) sq. ft. The CBD has the most Class C space available with 1.3 million sq. ft. The average asking rental rate for Class C space had hovered in the mid to upper $16 per sq. ft. during 2008, but has since declined to $15.58 per sq. ft. at first quarter 2010.

With the national credit crunch, the investment office market has slowed, but more purchases are anticipated with coming defaults and foreclosures. The 1.2 million sq. ft. Railway Exchange building, home to Macy’s downtown, is under contract to local developers. Also Downtown, Positive Investments of Los Angeles is acquiring the 750,000 sq. ft. Bank of America Plaza for $47.85 million. Several million dollars will be spent on upgrades. The largest real estate transaction expected in 2010 is Monsanto’s purchase of the 1.3 million sq. ft., 210-acre Chesterfield Village Research Center from Pfizer for $435 million.

Construction on the new toll-free, four-lane, bridge north of Downtown St. Louis will start in spring 2010, and the bridge should be completed by 2014. Already overpasses along I-70 have been demolished in preparation of bridge construction.

Other large public and private projects in Missouri include $500 million in Metropolitan Sewer District (MSD) upgrades, $102 million on the new National Archives and Records Administration military personnel facilities, and the $130.5 million expansion at the St. Louis Art Museum. Phase one of Pinnacle Entertainment’s $375 million River City Casino and Hotel opened In March. Another nearly billion dollars will be spent on medical center facilities and university facilities.

Lambert St. Louis International Airport has established a $1.7 million airline incentive program to attract replacement airlines for cuts by American Airlines planned for April 2010. Lambert will close two seldom used concourses and spend $50 million to modernize the other concourses, terminals and ticket counters. Chinese airlines have agreed to partner with the Midwest China Hub Commission and Lambert on a feasibility study to assess potential for opening St. Louis-China freight routes.

High-speed rail between St. Louis and Chicago will get $1.1 billion in federal stimulus funding for planning. Another $31 million will upgrade passenger service between St. Louis and Kansas City.

While the economy has negatively affected river traffic, the Port of St. Louis is getting prepared for the future. In Illinois, Tri City Regional Post District received $6 million in stimulus funds to expand the port. In Missouri, the City of St. Louis received $15.6 million (and added another $3.9 million) to replace the south dock at the municipal river terminal.

In Illinois, work continues on Scott Air Force Base’s $388 million makeover, the Conoco and EnCana’s Conoco Phillips $4 billion Wood River refinery expansion, Albingoa Bioenergy’s $200 million ethanol production facility, and the $2.9 billion Prairie State Energy synthetic natural gas plant about 40 miles southeast of St. Louis. Work to rebuild the east side levee is delayed until FEMA issues new flood maps. Estimated costs for the project range from $300 to $500 million.

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Market Highlights

• The overall availability rate continued to rise during first quarter 2010 to 16.9% from 16.3% at year-end 2009.
• Overall average asking rents fell during first quarter 2010 and are now at $18.23 per sq. ft. compared to $18.85 per sq. ft. at the end of 1st quarter 2009.
• Overall absorption at the end of first quarter 2010 was negative (260,000) sq. ft. compared to negative (173,000) sq. ft. at the end of first quarter 2009. Class A absorption ended first quarter 2010 at negative (193,000) sq. ft.
• Class A  average asking rents fell during first quarter 2010 to $21.59 per sq. ft. compared to $21.68 at year-end 2009. The Clayton submarket has the highest average rental rate at $25.19 per sq. ft.
• Class A sublease space fell during first quarter 2010 to 937,000 sq. ft. or 15.8% of available inventory, compared to 9.2% one year prior.
• Major transactions this quarter included Panera’s 73,800 sq. ft. lease in the South County submarket and Rabo Agrifinance’s 44,400 sq. ft. lease in the Creve Coeur/Westport submarket.

Market by Market Review

Central Business District

Total Inventory: 25.4 mil. sq. ft.
No. of Buildings: 198
Average Asking Class A Rent: $18.04
Average Asking Class B Rent: $15.00
Availability Rate: 23.0%
Available Space: 5.8 mil. sq. ft.
New Deliveries: 0 sq. ft.
Net Absorption (YTD): (105,400) sq. ft.

Downtown residential projects are going slowly. Roberts Tower, a $70 million, 25 -story condominium building, has topped out, is not enclosed, and work has stopped. Still in the development stage are the Alexa, a rehab of the former Chemical Building, into apartments; the Laurel, a rehab of the former Dillard’s department store in apartments and a hotel; Park Pacific, a rehab of the Union Pacific building into apartments; PD George Downtown Apartments and the rehab of 1900 Washington into apartments. It is expected that all of these projects will move forward shortly.

Office and retail developments underway include 600 Washington (formerly One City Centre), 1224 Washington, and 1111 Olive Project. The 1300 Market building (former Municipal Courts building), and the Railway Exchange building are planned as office and retail rehab. The Railway Exchange work includes reducing the size of Macy’s department store to three floors (about the size of its new stores), with the remainder of the 1.2 million building being office. St. Louis Centre, the former downtown retail mall, will be converted to 705 parking spaces and up to 100,000 sq. ft. of retail space. Just south of the downtown core, Chouteau Landing is proposed for rehab office space.

SCP Worldwide, owner of the St. Louis Blues, Scottrade Center and adjoining opera house, has plans for a $74 million renovation of Kiel Opera House into an entertainment/sports/art venue. The Cass-designed Central Public Library is closed until 2012 for a $70 million renovation that is underway.

Work on the proposed $376 million first phase of the multi-use Ballpark Village is stalled also and waiting for the financial markets to improve. The developer, Cordish Company and the Baseball Cardinals, have said that they will delay the sale of over $100 million in bonds for the first phase until the municipal bond market improves.
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Several downtown buildings are on the market including 535 and 505 Washington, 500 N. Broadway, and the vacant 0.5 million sq. ft. Jefferson Arms post-foreclosure. The former General American Life building located at 700 Market Street has been vacant for several years. This 128,500 sq. ft. building was designed by renowned architect Phillip Johnson and was recently acquired by Centaur Properties. Positive Investments of Los Angeles acquired the 750,000 sq. ft. Bank of America Plaza for $47.85 million.

The CBD has some large contiguous spaces readily available in 600 Washington, 1010 Market, 500 N. Broadway, Laclede Gas, Metropolitan Square, and 700 Market Street. 

The office market in the CBD changed drastically in 2009. Overall availability has risen and is now at 5.8 million sq. ft. or 23.0% of inventory from 4.6 million sq. ft. or 17.4% of total inventory at first quarter 2009. Absorption for first quarter 2010 was a negative (105,400) million sq. ft. Available Class A space is now 2.0 million sq. ft. or 18.9% of available space. While available Class A sublease space popped during the second quarter of 2009 to 150,200 sq. ft. or 7.1% of available Class A space, it is now 115,800 sq. ft. or 5.9% of available Class A space. Continuing a very short trend, Class A space had positive absorption of 58,900 sq. ft. during first quarter 2010 after positive absorption of 36,200 sq. ft. for year 2009. Average asking rent for Class A space remained stable during the year at near $18 per sq. ft.

Currently, available Class B space totals 2.5 million sq. ft. or 30.0% of inventory. Absorption for first quarter 2010 was a negative (110,100) sq. ft. Another 1.3 million sq. ft. or 20.2% of Class C space is available. Class C space absorption was a negative (54,200) sq. ft. for first quarter of 2010. Average asking rent for Class B space declined to $15.00 per sq. ft. at first quarter 2010 from $15.22 per sq. ft. at year-end 2009, and Class C space average asking rent decreased further to $12.94 per sq. ft. Rents in the CBD are the lowest in the region and are the best bargain for tenants in the region.

North of Downtown, Paul McKee and North Side Regeneration continue to work on its plan for 4.5 million sq. ft. of new commercial buildings and 10,000 new homes north of Downtown. Infrastructure, parks and other amenities would be added over the next 15 years on roughly 500 acres. Various Lawsuits appear to be quickly extinguished. The city has authorized $390 million in tax-based financing. In 2009, the state awarded over $19 million in tax credits for assembling land, and application can be made for additional tax credits in 2010.

Several buildings will be converted into apartments and the old power plant into restaurants at the former City Hospital site south of downtown.

Midtown

Total Inventory: 1.2 mil. sq. ft.
No. of Buildings: 19
Average Asking Class A Rent: $21.50
Average Asking Class B Rent: $13.97
Availability Rate: 7.1%
Available Space: 0.1 mil. sq. ft.
New Deliveries: 0 sq. ft.
Net Absorption (YTD): 10,800 sq. ft.

This small submarket has the lowest overall availability rate, at 7.1%, of all the submarkets. Total available space is only 81,700 sq. ft. Available Class A space is only 39,500 sq. ft., none of which is sublease space. Class A average asking rents were stable during 2009 and first quarter 2010.

The Beaux Arts building in Grand Center will be converted to the first charter visual and performing arts school in Missouri. Saint Louis University and the Lawrence Group will convert the former Interiors Unlimited building on Olive into a 57-room boutique hotel. Twenty-five apartments will also be built on Locust Street by the partnership.

CLAYTON

Total Inventory: 9.4 mil. sq. ft.
No. of Buildings: 118
Average Asking Class A Rent: $25.19
Average Asking Class B Rent: $20.71
Availability Rate: 15.1%
Available Space: 1.4 mil. sq. ft.
New Deliveries: 0 sq. ft.
Net Absorption (YTD): (57,800) sq. ft.

Although the availability rate increased in the first quarter of 2010 to 15.1% from 13.9% at year-end 2009, the Clayton submarket is still considered stable. Office buildings in the submarket are popular with institutional investors. Recently, the 580,000 sq. ft. Pierre Laclede Center was purchased by Newport Beach-based KBS Capital Markets for an estimated $75 million.

The only new, major office development in the region is the first building of Centene Plaza. It should be complete by mid-2010. Tenants in the 485,200 sq. ft. of office space will be Centene Corp. (200,000 sq. ft.); Armstrong Teasdale, a law firm (125, 000 sq. ft.); and Stinson Morrison Hecker, also a law firm (46,000 sq. ft.). Asking rent for the remaining office space is $32.50 per sq. ft. No announcement has been made of tenants for the 28,125 sq. ft. of retail space.

The current amount of total available space is 1.4 million square feet. Absorption for the first quarter 2010 was a negative (57,800) sq. ft. Overall average asking rent declined slightly during the first quarter of 2010 to $21.29
per sq. ft. from $21.81 per sq. ft. at year-end 2009.

During first quarter 2010, average asking rent for Class A space declined to $25.19 per sq. ft. from $26.06 per sq. ft. at year-end 2009, the lowest amount since second quarter 2009. Class B average asking rent increased to $20.71 per sq. ft. from $21.43 per sq. ft. during first quarter 2010. In the small Class C market, average asking rent was stable in the mid-to-upper $17 per sq. ft.

Class A availability is currently 15.3%, with 0.8 million sq. ft. available. Available sublease Class A space increased slightly during first quarter 2010 to 68,000 sq. ft. or 8.8% of total Class A space. Absorption for first quarter 2010 was a negative (35,700) sq. ft. The availability rate for Class B space increased during the quarter to 16.3% or 0.5 million sq. ft. from 14.5% at year-end 2009. Class B absorption for first quarter 2010 was just 510 sq. ft. Only 168,400 sq. ft. of Class C space is available in the submarket or 11.7% of inventory. A negative (22,700) sq. ft. was absorbed in first quarter 2010.

A number of other office developments have been discussed, but none are underway. A second 10-story building is planned for Centene Plaza at some later date. The development arm of Sikeston-based Montgomery Bank and St. Louis County had announced plans for a $100 million, 25-30 story mixed-use building, but the project is delayed until financial markets improve and significant pre-leasing occurs. The $568 million mixed-use development for Brown Group has also been placed on hold. The RJ York project with Westin Hotels for a 245 room hotel with 16,000 sq. ft. of meeting space and 20,000 sq. ft. of retail space is also on hold. Threatened foreclosure on the site caused York
to file bankruptcy.

The prospects for several other projects have not been announced. Apex Oil Co. and Koman Properties had proposed a 300,000 sq. ft. mixed-use building, Shaw Park Pointe, on Forsyth near Apex Oil’s headquarters. Conrad Properties planned two buildings, one with 130 luxury apartment units and one with 75-80,000 sq. ft. of office space, on the north side of the Clayton CBD. Gateway Real Estate Partners has a 3.3 acre tract (formerly a Schnucks supermarket) under contract at Hanley and Clayton Roads, Plans include a hotel, office space, stores and a parking garage.

Several hotels and additional retail facilities are under construction or planned across from the Galleria in Richmond Heights. The Boulevard, a mixed-use development, will add a 70,000 sq. ft. Dick’s Sporting Goods in 125,000 sq. ft. of retail space, 35,000 sq. ft. of office space and a hotel.

Creve Coeur/Westport

Total Inventory: 10.5 mil. sq. ft.
No. of Buildings: 132
Average Asking Class A Rent: $22.26
Average Asking Class B Rent: $17.64
Availability Rate: 15.4%
Available Space: 1.6 mil. sq. ft.
New Deliveries: 0 mil. sq. ft.
Net Absorption (YTD): 24,900 sq. ft.

There was little activity during first quarter 2010 in the Creve Coeur/Westport office submarket, but any activity is better than previous quarters when the submarket appeared to be flat. The availability rate declined to 15.4% at first quarter 2010 from 15.5%
at year-end 2009. Available space remains at 1.6 million sq. ft. Absorption for first quarter 2010 was a positive 24,900 sq. ft.

During the first quarter, the average asking rental rate for Class A space rose to $22.26 per sq. ft. from $21.96 per sq. ft. at year-end 2009. Average asking rent for Class B space decreased slightly
during the quarter to $17.64 per sq. ft. from $17.94 per sq. ft. Class C average asking rent rose during the quarter to $14.42 per sq. ft. from $14.26 per sq. ft. at year-end 2009.

During first quarter 2010, the amount of available Class A increased to 0.9 million sq. ft. with absorption a negative (46,100) sq. ft. The availability rate rose to 14.7% at first quarter 2010. Available Class A sublease space declined to 92,300 sq. ft. or 10.7% of Class A available space. Available Class B space is 0.5 million sq. ft. or 14.5% of total inventory, slightly lower than all of 2009. Class B absorption was 37,100 sq. ft. for first quarter 2010. Class C available space is limited in the submarket but availability did decrease during first quarter 2010 to 223,600 sq. ft. or 22.6% from 257,400 sq. ft. or 24.2% at year-end 2009.

Several speculative buildings for the submarket, the 210,000 sq. ft. CityPlace VII, the 100,000 sq. ft. CityPlace North, and an 80,000 sq. ft. office/retail project on Olive Boulevard, just west of I-270, have been announced, but none are under construction.

North County

Total Inventory: 9.6 mil. sq. ft.
No. of Buildings: 111
Average Asking Class A Rent: $19.86
Average Asking Class B Rent: $16.88
Availability Rate: 13.4%
Available Space: 1.3 mil. sq. ft.
New Deliveries: 0 sq. ft.
Net Absorption (YTD): (82,200) sq. ft.

During the first quarter 2010, overall available space increased slightly to 1.3 million sq. ft. or 13.4% of inventory. Overall absorption for the quarter was a negative (82,200) sq. ft. The average asking rent for Class A space remained stable during first quarter 2010 at $19.86 per sq. ft. while Class B average asking rent rose to $16.88 per sq. ft. from $15.97 per sq. ft. at year-end 2009. With limited availability, Class C average asking rent has decreased during the quarter to $15.39 per sq. ft. from $16.14 per sq. ft. at year-end 2009.

Available Class A space now totals 0.6 million sq. ft. or 21.2% of inventory, 15.7% or 99,800 sq. of which is sublease space. Absorption for Class A space during first quarter 2010 was a negative (85,300) sq. ft., and in the Class B market absorption was a negative (200) sq. ft. About 0.4 million sq. ft. or 8.6% of Class B space is available, about the same as all of 2009. Only 256,000 sq. ft. of Class C space is available. During the first quarter 2010, only 3,250 sq. ft. was absorbed.

The North County submarket is attractive to large users needing large amounts of parking. Twelve blocks of space of 30,000 sq. ft. or more are currently available in the submarket. Rents are the least expensive of the suburban markets.

A $60 million, 221,000 sq. ft. high-volume prescription fulfillment center is under construction in NorthPark for Express Scripts. No other build-to-suit or speculative office buildings are now under construction although McEagle Properties and Clayco Construction have announced a 150,000 sq. ft. speculative office building, NorthPark High Performance Office building.  

south County

Total Inventory: 8.4 mil. sq. ft.
No. of Buildings: 155
Average Asking Class A Rent: $22.04
Average Asking Class B Rent: $18.95
Availability Rate: 14.0%
Available Space: 1.2 mil. sq. ft.
New Deliveries: 0
Net Absorption (YTD): (10,800) sq. ft.

Once noted for its high occupancies and low turnover rate, the South County submarket has been hit hard in both the office and industrial sectors. Both Anheuser-Busch InBev and Maritz have sublease space on the market. The closing of the Chrysler plants and its suppliers is putting nearly 6 million sq. ft. of industrial space on the market. Available office space has risen to 1.2 million sq. ft., and availability is now 14.0% of total inventory. Overall net absorption for first quarter of 2010 was a negative (10,800) sq. ft.

Over 0.6 million sq. ft. of Class A space is currently available, 326,500 sq. ft. or 50.5% of which is sublease space. Average asking price for Class A space decreased slightly during the first quarter to $22.04 per sq. ft. from $22.09 per sq. ft. at year-end 2009. Class A absorption for first quarter 2010 was a negative 31,600 sq. ft. Available Class B space is now over 0.3 million sq. ft. and 9.9% of inventory. Average asking rent for Class B space continued its overall decline to $18.95 per sq. ft. at first quarter 2010. Available Class C space is minor in the submarket but increased during first quarter to 187,200 sq. ft. or 9.0% of inventory. Average asking rent declined to $16.29 per sq. ft. during first quarter 2010. Absorption for first quarter was 69,200 sq. ft. for Class B space and a negative (48,500) sq. ft. for Class C space.

The first phase of Pinnacle Entertainment’s $375 million River City casino and hotel complex opened in March.

West County

Total Inventory: 8.3 mil. sq. ft.
No. of Buildings: 128
Average Asking Class A Rent: $22.92
Average Asking Class B Rent: $19.94
Availability Rate: 14.2%
Available Space: 1.2 mil. sq. ft.
New Deliveries: 0 sq. ft.
Net Absorption (YTD): (43,300) sq. ft.

The prestigious West County submarket has experienced small fluctuations in availability for the past year. At first quarter 2010, 1.2 million sq. ft. is available or 14.2% of inventory, up slightly from 13.7% at year-end 2009. First quarter overall absorption was a negative (43,300) sq. ft.

Available Class A space is now 0.8 million sq. ft., 18.7% or 153,200 sq. ft. of which is sublease space. Class A absorption during first quarter 2010 was a negative (64,300) sq. ft. Average asking rent for Class A space was $22.92 at first quarter 2010, up from $22.80 per sq. ft. at year-end 2009.

First quarter 2010 absorption for Class B and Class C space was a negative (5,650) sq. ft. and (563) sq. ft. Available Class B space is 321,900 sq. ft., while available Class C space is only 40,600 sq. ft. Average asking rent for Class B space declined to $19.94 per sq. ft. at first quarter 2010 from $20.10 per sq. ft. at year-end 2009. The average asking rent for the small amount of Class C space rose to $18.18 per sq. ft. at first quarter 2010 from $18.02 per sq. ft. at year-end 2009.

Monsanto will purchase Chesterfield Village Research Center from Pfizer for $435 million in 2010. The 1.3 million sq. ft. center can accommodate 1,000 researchers. Scottrade plans a $36.3 million expansion, including a parking garage, to its headquarters in Town & Country. Sachs Properties has announced a second building of 150,000 sq. ft., Central Square II, in Chesterfield Village when economic conditions improve.

Additional buildings have been announced for the former County jail site and in business parks near the Spirit of St. Louis Airport in the Chesterfield Valley. Several large acreages (75-130 acres) have been approved for mixed-use development in the Valley, including office, retail and industrial space. All appear to be awaiting improvements in the financial markets and job growth.

st. Charles

Total Inventory: 4.5 mil. sq. ft.
No. of Buildings: 66
Average Asking Class A Rent: $20.90
Average Asking Class B Rent: $16.98
Availability Rate: 10.9%
Available Space: 0.5 mil. sq. ft.
New Deliveries: 0 sq. ft.
Net Absorption (YTD): 4,300 sq. ft.

The St. Charles office market was stable during the first quarter of 2010. Absorption was 4,300 sq. ft. Overall availability is 0.5 million sq. ft. or 10.9% of inventory. Available Class A space is now 199,200 sq. ft. or 7.7% of inventory. Sublease space is 81,300 sq. ft. or 40.8% of available Class A space. Class A absorption for first quarter 2010 was 10,000 sq. ft. The Class A average asking rent decreased to $20.90 at first quarter 2010 from $21.19 per sq. ft. at year-end 2009.

Class B availability increased slightly to 206,300 sq. ft. or 15.1% of inventory. Absorption for first quarter 2010 was a negative (5,700) sq. ft. The Class B average asking rent continues its decline and is now $16.98 per sq. ft. from $17.00 per sq. ft. at year-end 2009. Class C available space is only 88,400 sq. ft. No absorption occurred during the first quarter 2010. Average asking rent for Class C space is up-and-down, ranging from the low $13 per sq, ft. to low $14 per sq. ft.

Medco Finance Corp. of Carol Stream, Illinois purchased US Fidelis headquarters in Wentzville for $2.7 at a foreclosure sale. McEagle Properties has announced a 75,000 sq. ft. speculative office building in Winghaven, its 1,200 acre office/residential and retail development. A 60,000 sq. ft. building, Wall Street II, has been announced for St. Charles. A third building, the 132,000 sq. ft. West Highland office building will be financed by tax-exempt bonds. All of these projects are on hold. No work has started on the large multipurpose developments, Streets of St. Charles or Harbor San Carlos. Both include retail, residential, hotels and possibly office space.

Major Office Acquisitions

To view historical building sales information, please visit St. Louis market transactions.

Significant Leasing Activity